Since the onset of the pandemic, my Department has responded by working quickly to introduce supports for affected businesses, including in the form of loan guarantee facilities for SMEs.
MicroFinance Ireland’s COVID-19 business loans were launched for micro-enterprises that had been affected by the pandemic, while the COVID-19 Working Capital Scheme made loans available to SMEs as they sought to innovate, change or adapt in response to these challenges. These schemes were put in place as quickly as possible by repurposing and expanding existing loan guarantee schemes.
In July of 2020, the Future Growth Loan Scheme was expanded by €500m. This scheme offers state guaranteed loans for terms of 7-10 years to businesses seeking to make long-term investments. It has seen strong uptake since its expansion, and this is an indication that businesses are planning and making investment for a post-COVID-19 environment.
While these adapted supports were deployed as quickly as possible, work was also under way on the development of a tailored loan guarantee scheme to fit the specific needs of COVID-19-impacted businesses. Launched in September of 2020, the COVID-19 Credit Guarantee Scheme makes up to €2b in lending available to businesses that have been negatively impacted by the pandemic for terms of up to five-and-a-half-years. Where eligible, the scheme also allows for the re-financing of other COVID-19-related debt.
The COVID-19 Credit Guarantee Scheme was developed with the specific goal of widening the pool of participating lending institutions. To that end, the participating finance providers under the scheme include three banks, four non-bank lenders, and nineteen credit unions. Work is under way to bring more non-bank lenders into participation under the scheme, further broadening the options for businesses seeking to access appropriate financing in response to the impacts of the pandemic.
This delivery of the scheme through commercial finance providers offers an efficient mechanism for making competitive lending products available to COVID-19-impacted businesses. However, the operation of loan schemes through commercial finance providers also means that there is less scope to bring the interest rates down further than they are at present, as some interest must be charged by lenders if they are to cover overheads and capital costs if they are to continue to work with Government.
It should be noted that 96% of loans drawn under the scheme have been provided at interest rates of between 2.5% and 2.99%. Moreover, the loan guarantee schemes described above allow for interest-only payment periods, depending on the participating providers’ assessment.
The loan guarantee schemes in place for COVID-19-impacted SMEs have seen strong uptake to date, while the range and variety of these schemes ensures that there are options in place to provide that businesses have access to more appropriate financing for their specific COVID-19 needs.
I want to assure you that I and my colleagues across Government are continuing to keep the range of supports for businesses under review.
